Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is an independent agency under the Federal Reserve System. It was created in 2010 to protect and educate consumers about their dealings with financial services and markets. Its goal is to ensure that federal laws governing financial matters are enforced consistently and that consumers receive fair and competitive access to all financial products.

The CFPB is part of the Dodd-Frank Act that came about as a response to questionable practices in the lending and investment industries leading up to the Great Recession of 2008. It was the first federal agency to focus specifically on consumer rights and consumer financial protection.

The agency was given wide-ranging responsibilities to educate consumers, enforce rules and regulations and conduct studies on products and services like credit cards, mortgages, student, payday and auto loans and collection agencies.

The CFPB took over the review, writing and enforcement of regulations that was formerly shared by seven federal agencies: Department of Housing and Urban Development, Federal Deposit Insurance Corporation, Federal Reserve Board, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency and Office of Thrift Supervision.

In its first seven years of existence, the CFPB helped over 29 million consumers gain $11.9 billion in relief. Approximately $3.8 billion was in restitution for customers and another $7.7 billion came in the form of principal reductions, cancelled debt and other relief.

CFPB Under the Trump Administration

The Trump administration appointed Mick Mulvaney as the Acting Director of the CFPB on Nov. 25, 2017, but has yet to appoint a permanent director. Mulvaney was one of the bureau’s biggest critics during his time as a Congressman and while being director of the White House’s Office of Management and Budget.

He said he plans to make deep cuts in the CFPB’s budget. Put simply, the Trump administration does not like the Consumer Financial Protection Bureau and seeks to downgrade its authority.

Kathy Kraninger was nominated to head the CFPB in the summer of 2018, but the approval process could take months. Kraninger has no experience in consumer protection or financial services so the confirmation process could be a long one.

In the meantime, Mulvaney will continue to run the CFPB, the very bureau he had sponsored legislation to abolish when he was a congressman from South Carolina. Under Mulvaney, the bureau’s actions have slowed dramatically.

Some of the items eliminated or pushed into the background during Mulvaney’s first year include:

Taken no new enforcement actions and dropped multiple projects.

Cancelled its investigation into the hacking of Equifax which put the personal data of 143 million Americans at risk.

Shelved new regulations that would have reigned in the predatory practices of payday lenders.

Scaled back its student loan division and disbanded advisory boards that included community leaders, consumer advocates and financial industry representatives.

Let Citigroup off the hook without a fine after it had mishandled credit card rates on around 1.75 million accounts costing those consumers $335 million.

That being said, he also oversaw the largest fine ever handed out by the agency when Wells Fargo was ordered to pay $1 billion for mismanagement of mortgages and auto loans.

The Trump administration would like to pursue several changes to the bureau. Mulvaney wrote in the CFPB’s annual report released in April 2018, “As has been evident since the enactment of the Dodd-Frank Act, the Bureau is far too powerful, and with precious little oversight of its activities.”

He went on to request these four changes:

Fund the Bureau through Congressional appropriations

Require legislative approval of major Bureau rules

Ensure that the Director answers to the President in the exercise of executive authority

Create an independent Inspector General for the Bureau

President Trump has called the CFPB a “total disaster” tweeting, “Financial institutions have been devastated and unable to properly serve the public.”

Other politicians would argue this agency was created for devastated consumers who have been improperly served by financial institutions.

Basic Responsibilities of the CFPB

The CFPB writes and enforces laws for financial companies and products. It has investigative and enforcement authority, with the power to issue subpoenas and request testimony in federal court. It has the power to make rules, issue orders and provide guidance on financial matters.

The CFPB also is tasked with reviewing and streamlining regulations. The Dodd-Frank Act requires the CFPB to ensure that consumers have access to information about their financial options. For financial transactions such as loans, customers must be given information about the transaction in plain English before they make a decision. This mandate is a response to long-term consumer frustration with misleading or intentionally obscure language in mortgages, loan contracts and credit card agreements.

Thus, the CFPB’s Division of Consumer Education and Engagement operates programs targeted toward particular populations such as students, members of the armed forces and older Americans. The related Office of Financial Empowerment, launched in June 2012, specifically addresses the needs of low-income and other economically vulnerable Americans.

Over the past few years, the CFPB has extended its outreach to consumers and the financial industry. The bureau invites consumers to discuss their experiences with financial products and services via a variety of forums such as town hall meetings, the CFPB website and field hearings. Its Office of Community Affairs also invites local leaders to speak at forums regarding consumer and civil rights.

What Falls Under CFPB Jurisdiction

The Consumer Financial Protection Bureau has authority over a wide-range of financial products, including some areas that might surprise consumers.

The biggest area that the CFPB supervises is depository institution, which is any institution that accepts monetary deposits. That’s a fancy title for what consumers call banks, credit unions or savings and loans. The dealings with banks include financial products like mortgages, credit cards and bank accounts.

Investigating Consumer Complaints

In July 2011, a year after the CFPB’s founding, the bureau began its consumer response operations to accept and process direct consumer complaints. Consumers can file complaints through its website and by telephone, mail, fax and email. The CFPB first accepted complaints about credit cards but later allowed complaints about mortgages, bank services, consumer loans and private student loans.

After the bureau screens a consumer complaint and decides to investigate, it then communicates with the respective company. The company must report back to both the consumer and the CFPB within 15 days, detailing how it intends to respond to the complaint. More than 80% of complaints received are sent to companies for review and response.

If a consumer disputes a company’s response or a company fails to provide a response, the bureau may investigate further. In some instances, the bureau may transfer complaints to its Division of Supervision, Enforcement, and Fair Lending and Equal Opportunity.

The bureau launched its Consumer Complaint Database in June 2012, allowing the public to access information on submitted complaints. The database includes all basic information about a complaint, as well as any action taken and how the involved company responded.

The CFPB also maintains a confidential hotline for whistleblowers who wish to report suspected violations of federal consumer financial laws by the companies they work for, have business with, or compete against.

CFPB Enforcement Activity

The agency has been a newsmaker throughout its brief history. It took Congress two years to confirm Cordray as the first Director and since then, the agency’s enforcement and rulemaking divisions have made numerous headlines and caused much controversy.

Nearly every major financial institution has been hit with fines including Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, SunTrust, American Express, Ally Financial, Discover, Capital One and the list goes on from there. As of 2018, the CFPB has issued a total of $7.7 billion worth of fines averaging $60.3 million per fine.

Some of the notable settlements include:

Ocwen Loan Servicing – was ordered to provide $2 billion in principle reduction to borrowers and refund $125 million to nearly 185,000 borrowers for misconduct in the mortgage servicing process.

Wells Fargo – the CFPB levied a record $1 billion fine in 2018 for actions in the mortgage and auto loan business. Wells Fargo had previously been fined $100 million in 2016, which was also a record at the time, to the Civil Penalty Fund for opening unauthorized accounts.

Citibank and Its Subsidiaries – were ordered to pay an estimated $700 million to seven million consumers affected by deceptive marketing, billing, debt protection and credit monitoring products associated with its credit card services. Citibank also had to pay $35 million in civil penalties to the CFPB.

Corinthian Colleges Inc. – the for-profit college chain was ordered to grant relief of more than $500 million to students who were pressured into taking out private student loans with deceptive advertising, and then bullied into paying back the loans while still in school.

GE Capital Retail Bank– (now known as Synchrony Bank) was ordered to pay $225 million in relief to consumers for deceptive and discriminatory marketing practices on credit cards.

CarHopand Universal Acceptance Corp. – the “buy-here, pay-here” car sales company and its affiliated financing company were ordered to pay a $6.4 million fine for inaccurately reporting information on 84,000 customer accounts.

CFPB and Military Service Members

The CFPB has a special office set up to handle problems affecting members of the military, their families and veterans.

The Office of Servicemember Affairs is there to help with the challenges that deployment and frequent moves bring on military families. The office receives questions and complaints directly from members of the military and pursues action to help servicemembers work better with financial markets.

The CFPB ordered Security National Automotive Acceptance Company (SNAAC), to pay $3.28 million for illegal debt collection tactics. SNAAC specializes in auto loans to military members to buy used cars. According to the CFPB, the company threatened to contact superior officers when a member of the military defaulted on a loan.

The CFPB also took action against Military Assistance Company for hidden fees in their military allotments. Military Assistance was ordered to repay $3.1 million for not fully disclosing hidden fees to members of the military.

And in the most common example of businesses taking advantage of the military, Cash America International, a payday lender, was ordered to refund $14 million for violating the Military Lending Act by illegally overcharging service members and their families.

Author

Staff Writer

Max Fay is an entrepreneurial Millennial whose thoughtful writing shows he has a keen eye on both. Max has a genetic predisposition to being tight with his money and free with financial advice. At 25, he not only knows what an “emergency fund” is, he already has one. He wrote high school and college sports for every major newspaper in Florida while working his way through Florida State University. That experience was motivation to find another way to succeed financially and he has at Debt.org. Max can be reached at mfay@debt.org.

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